CANNON CTFA PREP QUESTIONS
AND ANSWERS
Jean-and-John-Simmons-are-married-and-own-their-own-home-as-tenants-by-entirety.-
When-John-dies-the-home-is-valued-at-$350,000.-How-much-will-be-counted-in-his-gross-
taxable-estate?
A.-None,-as-it-passes-directly-to-his-spouse,-Jean.
B.-$175,000---or-one-half-of-the-value
C.-$225,000---or-the-full-amount-minus-the-$125,000-one-time-exclusion-for-capital-gains-
on-a-person-residence.
D.-$350,000---the-full-amount-is-includable.---ans-✔✔B.-$175,000---or-one-half-the-value
Once-a-will-is-properly-drafted-it-is-valid:
A.-in-all-states.
B.-for-the-state-for-which-it-was-prepared.
C.-in-all-states-for-a-period-of-5-years.
D.-for-the-state-for-which-it-was-prepared-for-a-period-of-5-years.---ans-✔✔B.-for-the-state-
for-which-it-was-prepared.
In-managing-personal-trust-assets,-a-trustee-should-seek-which-of-the-following?
A.-maximum-income
B.-preservation-of-capital
C.-reasonable-income-and-preservation-of-capital,-including-purchasing-power
D.-maximum-income-and-reasonable-preservation-of-capital---ans-✔✔C.-reasonable-
income-and-preservation-of-capital-including-purchasing-power
A-decedent's-estate-being-settled-by-your-bank-contains-an-antique-automobile.-One-of-
the-directors-of-your-bank-indicates-that-he-would-like-to-buy-it.-You-should-do-which-of-
the-following?
A.-Sell-it-to-him-at-a-bargain-price-and-befriend-him.
B.-Have-a-qualified-appraisal-done-and-offer-it-to-him-at-that-value.
C.-Explain-that-he-may-not-purchase-the-car-from-the-estate.
,D.-Arrange-for-a-public-auction-at-which-he-may-buy-it-if-he-is-the-highest-bidder.---ans-
✔✔C.-Explain-that-he-may-not-purchase-the-car-from-the-estate.
If-you-hold-a-rental-property-in-an-irrevocable-trust,-when-is-it-all-right-to-rent-to-an-
employee-of-your-trust-department?
A.-Never
B.-When-the-employee-pays-fair-rent.
C.-When-the-employee-has-been-with-you-at-least-5-years-and-can-be-trusted.
D.-When-the-employee-has-no-connection-with-the-account-or-beneficiaries.---ans-✔✔A.-
Never
Which-of-the-following-generally-may-NOT-hold-real-property?
A.-Revocable-Living-Trusts-trusteed-by-a-corporate-fiduciary.
B.-Uniform-Gift-to-Minors-Account
C.-2503(c)-Minors-Trust
D.-Uniform-Transfer-to-Minors-Account---ans-✔✔B.-Uniform-Gifts-to-Minors-Account
H's-will-provides-that-upon-his-death,-$1-million-will-be-held-in-a-trust-for-the-benefit-of-his-
wife,-W.-This-trust-provides-that-W-will-receive-all-of-the-trust-income-and-will-receive-
distributions-of-principal-int-he-form-of-an-annuity-for-her-lifetime.-At-W's-death,-the-
remaining-trust-assets-will-be-distributed-to-a-designated-charity.-H's-executor-intends-to-
make-a-"QTIP"-election-for-this-trust.-Will-the-legacy-to-the-trust,-or-any-part-thereof,-be-
deductible-by-H's-estate,-or-if-so,-why?
A.-Yes,-the-entire-$1-million-will-qualify-for-the-estate-tax-marital-and-charitable-
deductions.
B.-No,-none-of-the-$1-million-will-qualify-for-the-estate-tax-marital-and-charitable-
deductions.
C.-Yes,-the-entire-$1-million-will-qualify-for-the-estate-tax-marital-deduction.
D.-Yes,-the-value-of-W's-income-interest-will-qualify-for-the-marital-deduction;-the-
remainder-will-not-qualify-for-any-deduction.---ans-✔✔C.-Yes,-the-entire-$1-million-will-
qualify-for-the-estate-tax-marital-deduction.
H-makes-a-gift-of-property-to-a-trust-for-the-benefit-of-his-children.-If-H-serves-as-a-trustee,-
what-limitations,-if-any,-should-be-placed-on-his-distribution-powers-in-order-to-avoid-
adverse-gift-and-estate-tax-consequences?
A.-H's-power-to-make-distributions-should-be-limited-by-ascertainable-standards-such-as-
health,-support-and-education.
B.-No-limitations-are-required.-
C.-H-should-be-prohibited-from-participating-in-making-any-distributions.
D.-H's-power-to-make-distributions-should-be-limited-to-those-required-to-discharge-his-
legal-obligation-to-support-his-children.---ans-✔✔A.-H's-power-to-make-distributions-
should-be-limited-by-ascertainable-standards-such-as-health,-support-and-education.
, Which-of-the-following-statements-about-a-QTIP-trust-is-false?
A.-An-executor-has-the-ability-to-elect,-partially-elect,-or-not-elect-to-qualify-for-QTIP-
treatment-any-part-of-the-marital-trust-property.
B.-The-spouse-beneficiary-need-not-have-the-ability-to-control-the-ultimate-disposition-of-
the-trust-property.
C.-The-grantor-spouse's-GST-exemption-cannot-be-allocated-to-trust-property.
D.-To-have-a-valid-QTIP-interest,-the-spouse-must-be-entitled-to-all-of-the-net-income-from-
the-trust-property.---ans-✔✔C.-The-grantor-spouse's-GST-exemption-cannot-be-allocated-
to-trust-property.
Which-of-the-following-is-an-advantage-of-a-QTIP-trust-over-the-life-estate/general-power-
of-appointment-trust?
A.-The-surviving-spouse-will-not-be-entitled-to-all-of-the-income-from-the-trust.
B.-The-decedent-spouse-can-control-the-ultimate-disposition-of-the-trust-property.
C.-The-decedent's-estate-will-receive-a-marital-deduction-for-the-property-transferred-to-
the-trust.
D.-The-surviving-spouse-can-withdraw-trust-property-during-her-life-to-make-gifts-to-
descendants.---ans-✔✔B.-The-decent-spouse-can-control-the-ultimate-disposition-of-the-
trust-property.
Payments-made-directly-to-an-educational-institution-for-tuition-on-behalf-of-grandchildren-
are:
A.-subject-to-gift-tax-to-the-extent-they-exceed-the-annual-exclusion.
B.-subject-to-generation-skipping-tax.
C.-not-subject-to-gift-tax.
D.-not-taxable-gifts-and-are-not-subject-to-generation-skipping-tax.---ans-✔✔D.-not-
taxable-gifts-and-are-not-subject-to-generation-skipping-tax.
If-you-own-a-7%-Bond-maturing-in-twenty-years,-and-long-term-rates-go-to-10%:
A.-your-bond-will-sell-at-a-premium.
B.-your-bond-will-be-called.
C.-the-annual-interest-payments-on-your-bond-will-decline.
D.-your-bond-will-sell-at-a-discount.---ans-✔✔D.-your-bond-will-sell-at-a-discount.
A-customer,-who-is-terminally-ill,-wishes-to-make-several-gifts-by-check-to-friends-before-
she-dies.-Since-these-individuals-are-not-beneficiaries-under-her-will,-she-is-anxious-to-
have-the-gifts-completed-before-her-death.-Which-of-the-following-should-represent-your-
advice-to-her?
A.-If-the-checks-are-dated-before-she-dies,-they-will-constitute-completed-gifts
AND ANSWERS
Jean-and-John-Simmons-are-married-and-own-their-own-home-as-tenants-by-entirety.-
When-John-dies-the-home-is-valued-at-$350,000.-How-much-will-be-counted-in-his-gross-
taxable-estate?
A.-None,-as-it-passes-directly-to-his-spouse,-Jean.
B.-$175,000---or-one-half-of-the-value
C.-$225,000---or-the-full-amount-minus-the-$125,000-one-time-exclusion-for-capital-gains-
on-a-person-residence.
D.-$350,000---the-full-amount-is-includable.---ans-✔✔B.-$175,000---or-one-half-the-value
Once-a-will-is-properly-drafted-it-is-valid:
A.-in-all-states.
B.-for-the-state-for-which-it-was-prepared.
C.-in-all-states-for-a-period-of-5-years.
D.-for-the-state-for-which-it-was-prepared-for-a-period-of-5-years.---ans-✔✔B.-for-the-state-
for-which-it-was-prepared.
In-managing-personal-trust-assets,-a-trustee-should-seek-which-of-the-following?
A.-maximum-income
B.-preservation-of-capital
C.-reasonable-income-and-preservation-of-capital,-including-purchasing-power
D.-maximum-income-and-reasonable-preservation-of-capital---ans-✔✔C.-reasonable-
income-and-preservation-of-capital-including-purchasing-power
A-decedent's-estate-being-settled-by-your-bank-contains-an-antique-automobile.-One-of-
the-directors-of-your-bank-indicates-that-he-would-like-to-buy-it.-You-should-do-which-of-
the-following?
A.-Sell-it-to-him-at-a-bargain-price-and-befriend-him.
B.-Have-a-qualified-appraisal-done-and-offer-it-to-him-at-that-value.
C.-Explain-that-he-may-not-purchase-the-car-from-the-estate.
,D.-Arrange-for-a-public-auction-at-which-he-may-buy-it-if-he-is-the-highest-bidder.---ans-
✔✔C.-Explain-that-he-may-not-purchase-the-car-from-the-estate.
If-you-hold-a-rental-property-in-an-irrevocable-trust,-when-is-it-all-right-to-rent-to-an-
employee-of-your-trust-department?
A.-Never
B.-When-the-employee-pays-fair-rent.
C.-When-the-employee-has-been-with-you-at-least-5-years-and-can-be-trusted.
D.-When-the-employee-has-no-connection-with-the-account-or-beneficiaries.---ans-✔✔A.-
Never
Which-of-the-following-generally-may-NOT-hold-real-property?
A.-Revocable-Living-Trusts-trusteed-by-a-corporate-fiduciary.
B.-Uniform-Gift-to-Minors-Account
C.-2503(c)-Minors-Trust
D.-Uniform-Transfer-to-Minors-Account---ans-✔✔B.-Uniform-Gifts-to-Minors-Account
H's-will-provides-that-upon-his-death,-$1-million-will-be-held-in-a-trust-for-the-benefit-of-his-
wife,-W.-This-trust-provides-that-W-will-receive-all-of-the-trust-income-and-will-receive-
distributions-of-principal-int-he-form-of-an-annuity-for-her-lifetime.-At-W's-death,-the-
remaining-trust-assets-will-be-distributed-to-a-designated-charity.-H's-executor-intends-to-
make-a-"QTIP"-election-for-this-trust.-Will-the-legacy-to-the-trust,-or-any-part-thereof,-be-
deductible-by-H's-estate,-or-if-so,-why?
A.-Yes,-the-entire-$1-million-will-qualify-for-the-estate-tax-marital-and-charitable-
deductions.
B.-No,-none-of-the-$1-million-will-qualify-for-the-estate-tax-marital-and-charitable-
deductions.
C.-Yes,-the-entire-$1-million-will-qualify-for-the-estate-tax-marital-deduction.
D.-Yes,-the-value-of-W's-income-interest-will-qualify-for-the-marital-deduction;-the-
remainder-will-not-qualify-for-any-deduction.---ans-✔✔C.-Yes,-the-entire-$1-million-will-
qualify-for-the-estate-tax-marital-deduction.
H-makes-a-gift-of-property-to-a-trust-for-the-benefit-of-his-children.-If-H-serves-as-a-trustee,-
what-limitations,-if-any,-should-be-placed-on-his-distribution-powers-in-order-to-avoid-
adverse-gift-and-estate-tax-consequences?
A.-H's-power-to-make-distributions-should-be-limited-by-ascertainable-standards-such-as-
health,-support-and-education.
B.-No-limitations-are-required.-
C.-H-should-be-prohibited-from-participating-in-making-any-distributions.
D.-H's-power-to-make-distributions-should-be-limited-to-those-required-to-discharge-his-
legal-obligation-to-support-his-children.---ans-✔✔A.-H's-power-to-make-distributions-
should-be-limited-by-ascertainable-standards-such-as-health,-support-and-education.
, Which-of-the-following-statements-about-a-QTIP-trust-is-false?
A.-An-executor-has-the-ability-to-elect,-partially-elect,-or-not-elect-to-qualify-for-QTIP-
treatment-any-part-of-the-marital-trust-property.
B.-The-spouse-beneficiary-need-not-have-the-ability-to-control-the-ultimate-disposition-of-
the-trust-property.
C.-The-grantor-spouse's-GST-exemption-cannot-be-allocated-to-trust-property.
D.-To-have-a-valid-QTIP-interest,-the-spouse-must-be-entitled-to-all-of-the-net-income-from-
the-trust-property.---ans-✔✔C.-The-grantor-spouse's-GST-exemption-cannot-be-allocated-
to-trust-property.
Which-of-the-following-is-an-advantage-of-a-QTIP-trust-over-the-life-estate/general-power-
of-appointment-trust?
A.-The-surviving-spouse-will-not-be-entitled-to-all-of-the-income-from-the-trust.
B.-The-decedent-spouse-can-control-the-ultimate-disposition-of-the-trust-property.
C.-The-decedent's-estate-will-receive-a-marital-deduction-for-the-property-transferred-to-
the-trust.
D.-The-surviving-spouse-can-withdraw-trust-property-during-her-life-to-make-gifts-to-
descendants.---ans-✔✔B.-The-decent-spouse-can-control-the-ultimate-disposition-of-the-
trust-property.
Payments-made-directly-to-an-educational-institution-for-tuition-on-behalf-of-grandchildren-
are:
A.-subject-to-gift-tax-to-the-extent-they-exceed-the-annual-exclusion.
B.-subject-to-generation-skipping-tax.
C.-not-subject-to-gift-tax.
D.-not-taxable-gifts-and-are-not-subject-to-generation-skipping-tax.---ans-✔✔D.-not-
taxable-gifts-and-are-not-subject-to-generation-skipping-tax.
If-you-own-a-7%-Bond-maturing-in-twenty-years,-and-long-term-rates-go-to-10%:
A.-your-bond-will-sell-at-a-premium.
B.-your-bond-will-be-called.
C.-the-annual-interest-payments-on-your-bond-will-decline.
D.-your-bond-will-sell-at-a-discount.---ans-✔✔D.-your-bond-will-sell-at-a-discount.
A-customer,-who-is-terminally-ill,-wishes-to-make-several-gifts-by-check-to-friends-before-
she-dies.-Since-these-individuals-are-not-beneficiaries-under-her-will,-she-is-anxious-to-
have-the-gifts-completed-before-her-death.-Which-of-the-following-should-represent-your-
advice-to-her?
A.-If-the-checks-are-dated-before-she-dies,-they-will-constitute-completed-gifts
